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Waste Management wasted
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July 29, 1999: 4:53 p.m. ET
Biggest U.S. trash hauler is taken to the dump after another 2Q warning
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NEW YORK (CNNfn) - Shares of Waste Management Inc. fell more than 17 percent Thursday after the country's biggest trash hauler warned that second-quarter earnings will fall short of already revised forecasts, and said its chief financial officer and general counsel have resigned.
The Houston-based company has been hit by operational problems and allegations of insider trading by top officials.
Waste Management said second-quarter results should total about 58 cents to 60 cents per diluted share, far lower than a revised downward range of 67 cents to 70 cents announced July 6.
Earnings tracker First Call Corp. had posted a revised consensus estimate of 67 cents per share after the first warning.
The company cited lower-than-expected operating results, higher interest expense and a decision not to include cost reductions from an accounting change and changes to recovering certain landfill accounts as reasons for the revised outlook.
"Unfortunately they've (warned) in a two-step fashion," said Hugh Holman, an analyst with BancBoston Robertson Stephens. "It's the two-step approach that's causing enormous dismay to investors. It suggests to investors they don't have a handle on the problem."
The Houston-based company will report its results Aug. 3.
Waste Management also will terminate its benefit pension plan this year at a cost of about $215 million, much higher than the $125 million previously estimated. The move is designed in part to restore investor confidence.
"I don't think the business is weak," Holman said. "Rather, it's weaker than it was projected to be. They're not anywhere close to losing money. This is a very profitable business."
Earlier this month, Waste Management launched an investigation into allegations of insider trading by senior executives.
Shareholder lawsuits charged Waste Management officials made a series of false and misleading statements about the company's financial position to inflate its stock price, enabling its officers and directors to sell their stocks at prices as high prices.
A company statement Thursday did not mention these allegations. The firm said CFO Earl E. DeFrates has resigned his post, but will remain with the company to assist the company's top executives. No further details were provided.
General counsel Gregory T. Sangalis also has resigned.
Shares in Waste Management (WMI) have slid sharply amid its recent troubles. The stock dropped 5-7/16 to close at 26.
The company also said Thursday it is launching a comprehensive review of its operations and forecasts for the rest of the year. Earlier forecasts about future quarters "may be ignored," the company said.
A major share repurchase program and "significant dispositions" of both core and non-core assets also are under consideration.
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Waste Management
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